Mortgage Lending Hits 20-Month Low

The British Bankers Association (BBA) is the latest organisation to release figures showing that there is currently little life in the housing market. Its figures for November suggest that mortgage lending by the major UK banks fell to a 20-month low. The 29,991 home loans approved in the month was half the level seen in November 2009 and the net lending (taking out redemptions and repayments) figure of £1.46bn was the lowest figure since August 1999.

The figures tied up with similar views expressed by the Council of Mortgage Lenders (CML) a few days previously. However, the number of people remortgaging picked up; there were 27,045 remortgage approvals in November, which was nearly 4,000 more than the average for the last six months. This was put down to borrowers choosing to replace maturing fixed-term mortgages. The relative stagnation in lending is expected to continue in the New Year as both borrowers and lenders alike remain cautious.

Meanwhile, consumers’ debt repayments on credit cards and overdrafts continued to outstrip new borrowing – although the figures showed that spending on credit cards was at least matched by repayments. The BBA’s data showed a distinct lack of appetite for personal loans and overdrafts, as repayments outstripped unsecured credit by £172m.

Commenting on these figures, David Dooks, BBA statistics director said: “Demand for unsecured lending has been weak for some time now. This is symptomatic of people being very cautious about household finances and working within their budget. Credit cards are merely being used as a form of payment. People are not wanting to extend themselves and take on more borrowing than they can afford.” The statistics also showed that people saved £4.6bn in the month – with a total of £626.4bn now put aside – almost 6% more than one year ago.

Latest house price figures from the Halifax say that house prices fell by 1.3% in December, to an average of £162,435. According to the lender, house prices ended 2010 1.6% cheaper than at the start of it. One of the most pertinent comments of the report suggested that a growing reluctance for homeowners to put their properties on the market could, if continued, stop the house price slide.